Previous studies have shown that induction of autoimmune diabetes by adult thymectomy and split dose irradiation of PVG.RT1^u rats can be prevented by their reconstitution with peripheral CD4⁺CD45RC⁻TCR-α/β⁺RT6⁺ cells and CD4⁺CD8⁻ thymocytes from normal syngeneic donors. These data provide evidence for the role of regulatory T cells in the prevention of a tissue-specific autoimmune disease but the mode of action of these cells has not been reported previously. In this study, autoimmune thyroiditis was induced in PVG.RT1^c rats using a similar protocol of thymectomy and irradiation. Although a cell-mediated mechanism has been implicated in the pathogenesis of diabetes in PVG.RT1^u rats, development of thyroiditis is independent of CD8⁺ T cells and is characterized by high titers of immunoglobulin (Ig)G1 antithyroglobulin antibodies, indicating a major humoral component in the pathogenesis of disease. As with autoimmune diabetes in PVG.RT1^u rats, development of thyroiditis was prevented by the transfer of CD4⁺CD45RC⁻ and CD4⁺CD8⁻ thymocytes from normal donors but not by CD4⁺CD45RC⁺ peripheral T cells. We now show that transforming growth factor (TGF)-β and interleukin (IL)-4 both play essential roles in the mechanism of this protection since administration of monoclonal antibodies that block the biological activity of either of these cytokines abrogates the protective effect of the donor cells in the recipient rats. The prevention of both diabetes and thyroiditis by CD4⁺CD45RC⁻ peripheral cells and CD4⁺CD8⁻ thymocytes therefore does not support the view that the mechanism of regulation involves a switch from a T helper cell type 1 (Th1) to a Th2-like response, but rather relies upon a specific suppression of the autoimmune responses involving TGF-β and IL-4. The observation that the same two cytokines were implicated in the protective mechanism, whether thymocytes or peripheral cells were used to prevent autoimmunity, strongly suggests that the regulatory cells from both sources act in the same way and that the thymocytes are programmed in the periphery for their protective role. The implications of this result with respect to immunological homeostasis are discussed.